Editorial: Time to talk about the bed tax

The mayor also wants to keep rate rises at 2.5 per cent, so is looking for savings in his first budget. Photo / Dean Purcell

Being Auckland's mayor was never going to be an easy job for Phil Goff.

Part of the balancing act he is required to perform is to satisfy ratepayers with his city hall leadership while convincing sector groups that Auckland Council is running the city in a credible and efficient way.

A powerful assault on an important new council policy - one which Goff stoutly defends - has surfaced in the pushback by the hotel industry against a new targeted rate on accommodation providers.

The row is over who should pay an annual $28 million dollar bill for promoting the city and drawing in visitors. Under the existing arrangement every ratepayer contributes $46 a year to encourage tourism and support big events.

Goff wants to shift the burden onto the sector itself, arguing that firms which offer beds to visitors get the benefits of the city's investment. The mayor also wants to keep rate rises at 2.5 per cent, so is looking for savings in his first budget.

Tourism is an established and expanding economic sector. Auckland is New Zealand's biggest tourism market and principal gateway to the country.

Expansion in the hotel industry reflects this healthy state of affairs, with several big projects underway. Demand has been such that hoteliers were able to increase average room rates in Auckland by 9 per cent over the last 12 months to $197 a night.

Projections by the Ministry of Business, Innovation and Employment show that visitor arrivals will grow by one million to 4.5 million by 2022, even if it takes longer for them to get downtown from the airport than it does to fly from Wellington.

By Goff's calculation, the targeted rate would add between $5 and $10 a night a room, though the hotel sector disputes these estimates.

It has produced examples which would see some property owners stung with rates increases up to 300 per cent, and large hotels by as much as $900,000 a year. How widespread this sort of impact could be is unclear, though Goff suggests the estimates are over the top.

The sector is not united. Airbnb, a relative newcomer, says it will, if required, collect a bed tax. The startup, which has more than 16,000 listings, notes that it gathers and remits taxes in dozens of cities.

In other words the policy Goff advocates is hardly a novel one and will not, despite what some industry figures suggest, threaten the viability of the accommodation sector.

The mayor says he is open to discussions, and accepts that small operators may have a case for an exemption, given the rate would be based on the capital value of a property.

The sector argues that Goff should look to shave costs within the council bureaucracy to fund the tourism spend, and says the debate should be around a national bed tax suggested in an industry document last year.

There is validity in these views, which suggests the parties ought to get together and thrash out a solution. Ratepayers deserve to hear why they should have to continue pay the bill.